Tariffs, Feedstocks, and the New Stratification of Biofuels

One week ago, global trade operated under familiar assumptions. This week, it doesn’t. With a sweeping executive order, the U.S. imposed a 10% base tariff on all imports, with sharply higher penalties—54% for China, 32% for Indonesia, and 20% for the EU. Over 50 countries are now in talks with the White House. China responded with a 34% retaliatory tariff, effectively halting U.S. agricultural exports. Amid the shock, the oil and gas lobby walked away with a strategic win: petroleum products, renewable diesel (HVO), and SAF were exempted, placing them in a privileged policy position.

This carve-out signals a shift in how Washington views biofuels. While ethanol and FAME biodiesel remain tariff-exposed, HVO and SAF are now the protected class—backed by aviation mandates and low-CI fuel pathways. The treatment of blended fuels like B19 remains ambiguous, with speculation that low-percentage biodiesel blends may be classified as petroleum products and thus exempt. Market reaction has been swift and sharp: ICE gasoil collapsed from $676 to $615/ton, reflecting broad-based macro risk and trade dislocation. In Northwest Europe, barge markets saw flat prices drop in tandem, while premiums rose nearly $20/mt as BOGO surged to nearly $400/mt—suggesting margin pressure and supply tightness are building in opposite directions.

In the U.S., the D4 RIN rally to $1.042 reflects rising compliance demand amid shrinking supply, but it hasn’t saved producer margins. Biodiesel screen margins for July dropped further to -$0.30/gal, despite the credit spike. Producers are facing compounding risks: delayed 45Z guidance, export friction, and soft domestic blending demand. Oil World revised global biodiesel/HVO production down by 1.8 million MT, with a 1 million MT cut from the U.S. But many U.S. players see this as far too conservative. This blog holds to its view: U.S. production is on track to fall by 6–7 million MT in 2025, a figure driven by structural headwinds, not just temporary ones.

In Europe, early-week price strength quickly faded. UCOME fell to $1,476/ton by Friday, nearly $80 lower than earlier in the week. FAME and RME premiums also softened, even as BOGO remained elevated, highlighting the decoupling of feedstock and finished product dynamics. Much of this volatility reflects underlying feedstock risk. UCO values softened, particularly in Asia, due to sluggish Chinese demand and ongoing traceability concerns from China and Malaysia. Tallow prices firmed, buoyed by SAF/HVO demand and tight supply—and now Brazilian tallow is tariffed, with zero imports to the U.S. in February. On top of that, Canadian canola oil has been sidelined, as tariff exposure and CI pathway uncertainty have driven imports to a 4-year low. Canada is now redirecting flow to Europe and Asia, cutting off another U.S. feedstock stream.

For now, the tiering of fuels is clear. HVO and SAF are structurally advantaged—backed by infrastructure compatibility, carbon intensity alignment, and now trade protection. Biodiesel and ethanol face eroding margins, regulatory limbo, and geopolitical pressure. Feedstock supply chains are fragmenting rapidly, and unless clarity on 45Z guidance returns and fiscal support is reinstated, the U.S. risks losing not just production—but market relevance. The energy transition is not slowing, but the margin for error is gone. Biodiesel is now fighting to hold the line.